Ian Cruz, a seasoned real estate investor, shares his experiences and strategies in the world of commercial real estate. From networking tips that have propelled his success to the power of taking action and learning from mistakes, Ian's expertise is your secret weapon to thrive in the competitive world of commercial real estate.
- The Power of Networking: Ian emphasizes the importance of networking and how it played a pivotal role in his real estate journey. He recommends attending various meetups and events, even those outside your comfort zone, to expand your network and find like-minded investors.
- Taking Action and Learning from Mistakes: One of the most significant lessons Ian shares is the importance of taking action. He highlights the trap of analysis paralysis and how it hindered his progress initially. Ian encourages aspiring investors to start, even if it feels uncomfortable, as the best learning often comes from real-world experiences.
- Building Trust in Partnerships: Ian discusses the value of trust in forming successful partnerships. He touches on the significance of transparent communication, sharing experiences, and building a track record to attract capital partners. Additionally, he emphasizes the importance of having the right team, local connections, and systems in place to ensure project success.
Ian Cruz | Real Estate Background
- Partner at ELEV8 Capital
- Over 20 units of short, mid, and long-term rentals and multifamily in the Bay Area and Cincinnati
- Based in: San Jose, CA
- Say hi to him at:
- Best Ever Book: Outlive by Peter Attia
- Greatest Lesson: Not getting started. I got stuck in the analysis paralysis phase for too long and should have been taking action.
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Quick disclaimer, the views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to best ever show.com.
Just get started, get your foot in the door, even if it makes you uncomfortable and say yes to things that otherwise you may naturally feel uncomfortable doing. Start to take that attitude to step outside of your home.
Welcome to the best ever show the world's longest running daily commercial real estate podcast Our hosts interview commercial real estate experts every day to get you the best advice ever with none of the fluffy stuff.
Best ever listeners. Welcome to the best real estate investing advice ever show. I'm Slocomb Reed and today we are joined by Ian Cruz. Ian is joining us from San Jose, California. He is a partner in Elevate Capital. He's also a manager of finance for a venture capital firm. His focus is value-add investing, primarily in multifamily. His current real estate portfolio consists of short, medium, and long-term rentals in both the Bay Area of California and here in Cincinnati, Ohio, where I am, that totals over 20 units. Ian, can you tell us a little bit more about your background, what you're currently focused on?
Yeah, thanks for having me, Slocomb. I've been a big fan of your podcast and also it was actually the best ever apartment syndication book that got me really going down this whole journey. So thank you for having me. Very honored to be here. A little bit about myself. My name is Ian Cruz as Slocomb mentioned. By day I have my CPA license and I work in finance over at a venture capital firm. Mainly responsible for handling the financial reporting and preparing financial statements. Outside of my W2 career, I also invest in real estate and I've really enjoyed that entire journey because I can take my skillset in analyzing numbers and preparing financial statements into analyzing properties and how they perform. But in addition to that, you have to wear a whole lot of different hats as you own rental properties. So I enjoy the thrill of getting to meet other investors, other property managers, other parties, because real estate really is a team sport, as opposed to my W2, where I look at Excel all day.
Gotcha. I have a feeling we're going to end up talking primarily about your investing in Cincinnati and your partnerships and Ian and I actually know each other outside of the podcast. I know there are a few organizations that you're involved with in regards to real estate investing that I didn't list in your bio, I think we'll get to that here soon, but first I want to know more about the investing you're doing in the Bay Area.
Yeah. So I started off investing, I think like many listeners, the first thing you want to do is a house hack. So buying in California is very expensive. It's very daunting. And even if you're not reading books and things like that, it kind of forces you into that mindset of how can I lower my cost of living? Right?
Even when I was renting fresh out of college, I guess I was rent hacking. I was renting out a house and renting out the rooms, even though I wasn't owning anything, and then eventually kind of worked my way up to this duplex over here that I have a midterm rental for. And then fortunately, my mom also has some properties here that I've had some exposure to managing five units. And we did what's known as a built to suit exchange to do a 1031 exchange into an apartment complex over in Santa Clara, California, and we added an ADU to that property as well.
So very different profile of a market. It's an appreciation market. Typically they don't cash flow, but if you own property, eventually you may be sitting on a lot of equity. So you may be able to 1031 that into some multifamily where you're still able to get some cashflow out of it. So we manage another six units over there that are the ADU. So ADUs are the big play over in the Bay area because the land is so expensive there. So we have an ADU that we rent out to travel nurses. And then we also have five units that are subsidized housing. So that is pretty good asset for us to have as well.
Tell us a little more about what you're doing in Cincinnati and why you chose this market.
So I mentioned that I started off in California mainly because I wanted to house hack. And then also because I had some family exposure, being able to do stuff locally makes sense while you can, being able to drive to the apartment complex that we have makes sense. Learning as much as we could locally. We tried to do as much of that as we could, but eventually you get tapped out of capital and you want a little bit more diversity in your portfolio anyways, rather than being just solely subject to having an appreciation play, which is going to be your assets over in the Bay area or over in California. Obviously there are other reasons why people move towards the Midwest.
There's cash flow, but California is notoriously difficult for landlords. Fortunately for me, I know knock on wood, I haven't had any tough experiences there, but some people are just driven out of doing business in California because there are some stories there. My big rule when it comes to investing is investing in the market that you know. That's why I did some stuff in California.
And it's kind of the funny story, but I know Cincinnati pretty well because I go there for a reason entirely outside of real estate, which is because I'm this crazy diehard Bengals fan and have been for the past 15 years. So I've struggled through that for a long time, but I've been going there since I was a teenager and over the years I started going there more and more frequently getting to know the neighborhoods. I actually founded a fan club over in the Bay area called the fourth street Bengals and they got posted on Bengals.com. And a bunch of people who are from Cincinnati actually started all going to that bar.
So I started getting to know people local to the area who gave me insights of different neighborhoods and things like that, that knew on site. I wouldn't have otherwise understood or appreciated. And even when I was doing reference checks, I'd often see mutual friends of people, whether they be contractors, property managers, and things like that. But there are people outside of real estate. So having that connection to people, it's not the biggest deal, but it is at least worth something.
And then eventually me personally investing out of state. Some people have the rule that you want to invest somewhere where you have a direct flight to. For me, I also want that to be a place where I enjoy going. I say this quite often. I'm happy every time I'm in Cincinnati, there are a number of cool coffee shops for me to go and work remotely at. I have never dreading a trip that I go out there and there are a number of other markets that have similar profiles, similar metrics.
And what I tell people who get caught up in that analysis paralysis phase is to figure out where you can do business the best and some of the stuff is going to be quantitative. Some of the stuff is going to be like, Oh, the median income is five times the median rent, but there are going to be a number of those markets that hit those metrics that you like, but then also figure out where you feel comfortable doing business. And for me, it was Cincinnati, Ohio.
And when people send me deals over in the other seas of Ohio, I just kind of pass them on to our network. I trade notes with people, but I've decided to just focus really on where my niche basically.
That's interesting. Cincinnati Bengals fan. That's not the reason I was expecting you to say Cincinnati. Bouncing cash flow in the Midwest with the high appreciation and frankly, high volatility and high regulation of California makes a lot of sense though.
Yeah, I say what got me started, but obviously there are a number of fundamental reasons that are polar opposite to what you see in California. A number of just the benchmarks that people look at, they're saying, Hey, I want to hit the 1% rule. Well in California, you're not even hitting half a percent rent to price. So rent to price ratio being your monthly rent being 1% of your purchase price on a property. You're not coming close in California, but where people have built wealth in California is by buying, holding on for a while, sitting on some appreciation, and then they can 1031 into something else, either with a lower LTV or doing something out of state.
Separately, another lot that benefits California a lot is Prop 13. So being in a place with lower property taxes and basically never getting them reassessed is the reason why prices go up so high because the price is so constrained because people know that their property taxes are so low. So over time, they actually do end up cash flowing.
So for me on our properties that we own now, or historically have owned in the Bay area, the fact that I was able to find some way to get them to cash flow even two or 3% is a miracle over there, but you're like, okay, we're paying down a loan that's gonna be better, better terms, better interest rates, just kind of similar to why the kinds of deals that you get in Ohio, I struggled not being local to Ohio.
In the Bay area, being able to get good primary residence debt and knowing that I'm grandfathered into a low property tax and can hold onto those properties for a while and then also keep that potential for appreciation.
Yeah, that is an interesting point. And metrics like the 1% rule end up being pretty crude, especially a crude comparison between markets, because the vast majority of our properties expenses are not proportional to value. So I get what you're saying though. It's a much more valuable metric when comparing deals within a market where you have a certain benchmark.
Cincinnati, those goalposts have certainly moved over the last decade with regards to the 1% rule, but I get where you're coming from. Ian, I think we first connected through the best ever meetup, the local meetup affiliated with this podcast and with Joe Fairless here in Cincinnati, and then we first properly connected because you were bringing a group of west coast investors through Cincinnati on a tour not only of neighborhoods and properties but also a tour through the network that you were building.
I know that networking with other investors on the west coast has been one of your priorities. What is it that you're doing there and what is the goal, are you focused on raising capital right now for future deals?
Great question. So I did recently, it was in mid September, I brought a group of investors over to Cincinnati. You were gracious enough to show us around town. So was Joe Cornwell, Jadib Balakar, who was a recent guest of an episode. We had another investor, Wakefield Lee. We had a number of other property managers and realtors and other local parties show us around, but.
First of all, thank you, Slocomb, for showing us around Northside, Cincinnati, and being able to educate our investor base. So for me, I think I'm going to take a step back a little bit. I talked about how I have a background in accounting and I basically look at spreadsheets all day and I look at deals for other people that I don't quite have access to, but I get to understand how to run numbers and things like that.
I think part of what has been so thrilling about real estate is this ability to wear different hats and 20 year old me would not have liked even the idea of capital raising or talking to people or presenting and things like that. And it's been a journey of personal growth as well, to be hosting a field trip, to be on this podcast with you, to be speaking at conferences and things like that. So that has been something that it's not just numbers, it's not just money. It's been really great to do that as well. And to be able to help people learn how to invest, whether they invest in Cincinnati or in other markets and just to network.
So as part of my journey, I joined just this similar to the way that you have a group called both Best Ever and REI AGC, right? Those are the two local meetups that you guys go to and are active in. I'm part of a group called SARE, which is Subtle Asian Real Estate. And then I'm a part of some other various investment communities as well. And when I started my journey, I started networking with people and learning so so much from them along the way. So to be able to share some of the things that I've learned and place myself as the go-to person for Cincinnati, that has been really great. And then if people are interested in other markets in the Midwest, kind of just pass them on to other investors who I've had really good experiences with investing in, in other Ohio or other Midwest markets.
For me, it's a priority to make sure that people know what they're investing in and people know who they're investing with. So people have heard all these stories about me going to Cincinnati and me doing deals with various people who have done very large deals, such as Wakefield and then people within our community that are closing on these large portfolios in Cincinnati, it just kind of came about organically where I just posted that I was going and the next thing you know, I was hosting a field trip. I had no intention of hosting a field trip, but people were starting to go.
Let me know the next time you're in town. I would love to go when you go. So I didn't really have to plan that field trip. I didn't plan it too much, but when I started getting people telling me that they're coming all at the same time, like, okay, I have to show them a really good time that I have to make sure that I get to connect them with the best investors over here in Cincinnati, such as yourself, such as Joe, such as all the people who are gracious enough with their time to show us around. And then we were also fortunate that it was during Oktoberfest and during a Bengals home game. So had a little bit of fun as well. So people could enjoy and get to know the city as well.
Like I said, all this stuff has been organic and it's come to the point where people are just really interested in the deals that I'm doing and capital raising comes as a part of that.
Cincinnati will definitely take any excuse to drink beer outside. Including into specialty football. Ian, how many deals have you done in Cincinnati thus far? Acquired.
Under contract for a fourth. So we have six units and I guess we're about to get four fourplexes. So we have two fourplexes that we're rehabbing right now. And then we also have an Airbnb.
Ian out of your Cincinnati deals thus far, have you brought in other capital partners, not from Cincinnati on those deals?
Yes. We have done various JVs and this is something that I've spoken with you about and other investors about best practices for handling partnerships and taking outside money because in order to scale your portfolio, it does help to do partnerships. So we've done some partnerships with my smaller group, Elevate Capital. Separately, we have also done deals on a platform called Fractional, which is a startup that a good friend of mine, Stella Hahn actually founded. She's over in Fremont, California and she's a rock star. She founded this company. There are a number of startups that are trying to tackle the co-ownership space of real estate that allow people to invest in real estate with a smaller dollar to kind of get themselves in the game, right, and learn how things work.
There are a number of different ways that people go about it. Some of them are by investing in REITs of a property, so you get a share of a property and it's this very passive vehicle to get into property ownership. But what Fractional does is they pretty much take the most active approach to joint ventures in buying properties.
For example, we bought an Airbnb with other partners, but everybody within that partnership is an active member. So we have a lot of meetings and we have, it used to be weekly, now they're less frequent, but we have meetings where we get to vote on things. We handle things together and I was mainly the underwriting person. I was mainly the person sourcing the deal and things like that. Fun fact about that property, but we actually had Jason Snell, who does all the murals over in OTR, he did the mural for that property. I was the one who reached out to him for that. But then we have a whole, another group of our partnership that was very active in either the short-term rental management or the marketing or creating the logos. We delegate it and we all work together.
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Whether or not saying that you've raised capital is the best way to put it. You've raised capital for the deals that you've done in Cincinnati. I know that these are joint venture partners. They're not passive. We have a sophisticated listener base with best ever. I'm willing to assume that our listeners know what I'm getting at here. Asking more for specifics and advice for our best ever listeners who are considering putting deals together the way that you are or getting started putting together deals together in general, what are the activities that you did that led to the relationships that led to your JV partners on these deals?
Great question. A lot of things are about trust. So eventually I share some deals. I started off doing deals by myself or with one partner with Daniel and then you want to build a track record and start to grow your portfolio and share the things that you're learning along the way.
As we started to look at additional deals, there's a little bit of word of mouth. There are people who know me through various networks and things like that. So there's a lot of networking. There are a lot of networking events that I attended. I'm within certain circles like Linfinity and these certain groups where the people that are guiding me are also very established. So I know that they're looking over our deals and things like that. Separately, I was hosting weekly underwriting calls for quite a while.
So we were looking at properties, we were getting the OMS, we were underwriting properties much larger than the ones that we've been closing on. We've gotten close on a number of them, but as you can imagine, this past year has been just very tough for numbers to pencil out. And there have been all sorts of things that have happened. We've had to walk away from more deals than we've been able to close, whether it be something that we found on the inspection report, collapsed sewer line, foundation issues, things of that nature.
Or somewhat recently around the 20 units, the seller decided not to sell after we were the top offer coming in with 1031 money as well. So things have been a little bit difficult this year. That's just kind of the way things go. But every time you do this, you get another rep, you're getting repetition, you're learning new lessons every step of the way. And for me, it's been very open and transparent communication with people sharing how my deals are going. I do a lot of write-ups about deals that are happening. And host a lot of calls and I'm very fortunate that for a very, very recent deal, I threw together a call and I just said, Hey, we're going to have this call in three hours. And then 20 people were on. And then by the time I shared the deal, a whole bunch of people reached out to me saying, we are overcommitted. So this is something that's under contract right now, but we were well overcommitted right now, just very quickly.
It's building and maintaining those relationships. But then also I think people see me going into the market and buildingthe deal is a lot more likely to succeed. If you have the right boots on the ground, the right team in place, it's not just me, right? It's having all the right people around you, whether it be your team in place, like your PM, your co-investment partners who may be local. I built relationships with people who are local to the area that check up on our properties and the right system and processes in place. So I think people have a lot of confidence in our ability to execute in the market.
That makes a lot of sense. Ian, for our best ever listeners who want to gain access to the real estate investor networks, similar to the ones that you're currently involved in your partnerships, but you've also named a few organizations where people are actively hunting for deals, both locally and in other parts of the country. What advice do you have to newer investors who are interested in gaining access to networks like those and like the ones that you're a part of?
Great question. So I'd say the first thing to do is for me personally, I was just saying yes to everything, going to as many meetups as I can, you eventually find your tribe. There are a number of different meetups out there. It becomes impossible to attend them all, but having a number of different groups that you meet with frequently and things like that, for me personally, there was one group.
It's called subtle Asian real estate, which actually started off as a meme group. It was just a joke in 2020. And then it somehow turned into this powerhouse where they're doing all these really cool deals and stuff like that. So that's on Facebook. So there are a number of good Facebook groups such as that. And they hosted a field trip to Dallas. There were like 70 people who went to Dallas on this field trip. And I attended that field trip. I got to learn a little bit about the market, but more importantly, I met people on that field trip where we just decided to start talking every week. We had our own little accountability group and then everything snowballed from there. So that was the main group that I'm a part of.
And then from there, you just meet one person who knows another person and you build your network from there, but it starts from having that attitude of saying yes. Going to places where you're uncomfortable. Somebody like me, an accountant that used to hate networking that used to hate talking to people, just stepping outside your comfort zone to talk to new people is definitely a good thing.
And then for me personally, I thought going into the market that I wanted to invest in and not just be complete remote by sight and seeing and stuff like that and join groups like best ever. That was super helpful for me as well.
That makes a lot of sense. I do have to say knowing Ian outside of this podcast, I am struggling to believe that you, someone who posts himself imitating end zone celebrations from Bengals wide receivers on Facebook is also struggling to want to meet people. But that makes a lot of sense. Say yes, go to the meetups, take the coffee meetings and get as connected as you possibly can.
Ian, are you ready for the best ever lightning round?
Yes. What is the best ever book you recently read?
Great question. I try to go with an answer of that. I think most people are going to give the same kind of real estate answer is you actually just text me because you're like, Ian, do you sleep?
So maybe I'm going to just go down that road because I recently read a book on sleep. I'm going to give some books on health and nutrition because they allow you to perform better in anything you do, even including your real estate investing. Because once you go down this rabbit hole, it's very easy to burn out if you don't take care of yourself. So a book that I'm reading right now is called Outlive by Peter Attia. Peter Attia is somebody who is very well known in the health and longevity space and we're, we're trying to do this to, you know, live higher quality lives. So I would say that that's a good book.
And then since you mentioned it, so I'm going to throw in the book, Why We Sleep by Matthew Walker.
I mentioned it outside of the interview, but we'll take the recommendation anyways. And thank you. What is your best ever way to give back?
For me personally, you can give back capital, but you can also give back your time. There are a number of organizations that I support, but in terms of what I do personally, this is completely out of real estate. But when I was a young, it was the sport of boxing actually that taught me the discipline to really be successful in everything in life. So I, as a young teenager, used to compete at a boxing gym, at a non-profit boxing gym, and that really changed my whole trajectory because I just learned what hard work was. I learned so many lessons in life through participating in that sport. And for the past 10 years, I've actually volunteered as a coach. I don't do any private lessons, anything like that. I've been a volunteer head coach at that gym, coaching the amateur team for 10 years. And I get a lot of fulfillment out of hopefully changing lives in the way that boxing as a sport was able to change mine.
That's awesome. Ian, specific to the properties that you have acquired, what is the biggest mistake you've made and the best ever lesson that resulted from it?
I've made several mistakes in real estate over time. I feel like the list is too long. Honestly, for me was not getting started. No matter how many books you read, you're still going to go ahead and make the mistakes that you thought that you wouldn't because these repetitions, as you go through transactions, they actually are very fast closing your due diligence period, all that kind of stuff for you to knock out every single thing. Sometimes mistakes will be made. I think my biggest mistake was analysis paralysis phase. I read so many books that told me the exact same thing.
I read Best Ever Apartment syndication book, but I also read Multifamily Millionaire, Multifamily Millions, Due Diligence Handbook. They're all great, but eventually, if you're reading all the same books, but you're not taking action, I think that's a big, big mistake. So my biggest mistake was not getting started.
What about a mistake specific to a property in your portfolio?
There are so many things that keep you on the edge of your seat, that keep you on your toes. And that's why when you go through these, for example, we're in the middle of writing a PSA. Sometimes I have these experiences where it's like, oh, can we add this? Can we add that? There was a property where we were under a 1031 exchange and it was under the assumption that one of the units would be fully renovated by the time we closed. And basically what the seller did there was just strung us out because we're on a timeline. And we had it on LOI. This unit had to be delivered, not filled, but turned. And we just got strung out until we were like, we just have to close. And we'd love to hear your story on how to handle that because it was a very well-known seller who has a lot of properties who I would think their reputation matters enough to not pull something like that, but they just still did it anyways. And we took the hit a few thousand, obviously we had to turn the unit, but there are so many things like that just happen in a real estate. So Slocomb, just curious to hear what your thoughts are. If you were in that situation, how do you prevent it?
That's a good question.
We don't have too much time to dive into it. We're running short on time here. My primary consideration would be not post-closing, but post-contract deliverables from the seller. What is the system for accountability inherent in the contract? By what means can you check, track, verify that things are happening? And are there any penalties built into the contract in the event the seller doesn't perform on an action contract, but you still able to close.
For example, if seller elects not to renovate the apartment, a renovation escrow to the buyer held by the title company for X thousand dollars, five or 10, it will automatically be applied based on the verification of the condition of the property by the buyer on or before the day of closing or something like that. And I'm not trying to be an attorney here. That's not legal advice. This is the first thing that comes to mind.
Last question of the lightning round. What is your best ever advice?
My best ever advice is to just get started, get your foot in the door, even if it makes you uncomfortable and say yes to things that otherwise you may naturally feel uncomfortable doing. Start to take that attitude to step outside of your comfort zone.
Last question, where can people get in touch with you?
The best way to get in touch with me is on Instagram. My handle is CincyCashflow and feel free to also find me on LinkedIn using my name, Ian Cruz.
That link is in the show notes. Ian, thank you. Best ever listeners. Thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five star review and share this episode with a friend you know, we can't value to through our conversation today. Thank you and have a best ever day.
Thank you everyone for listening.
Hi Best Ever listeners, Joe Fairless here again. And one last thing before you go, would you like to receive a short weekly email with proven tips from experienced investors, free tools and resources, and a roundup of the week's most relevant news and Best Ever content? Well, if so, join the community of nearly 15,000 commercial real estate passive and active investors who receive the Best Ever newsletter. Just go to bestevercre.com forward slash access and you'll get the very next one. I hope you enjoyed this episode. And as always, thank you for listening and have a best ever day.